Factory growth weakens in March

MANUFACTURING in the country improved at its slowest pace in eight months in March, as output increased at the softest rate in seven, according to the latest monthly survey IHS Markit conducted for Nikkei, Inc., that blamed softer demand for Philippine goods abroad and port congestion.

The seasonally adjusted Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) clocked in at 51.5 in March, easing from the preceding month’s 51.9 to signal a “modest improvement” in operating conditions. It was the weakest improvement since August 2018’s 51.9.

March also marked the fourth straight month that improvement of business conditions eased.

A PMI reading above 50 indicates improvement in business conditions from the preceding month, while a score below that point signals deterioration.

The manufacturing PMI consists of five sub-indices, with new orders having the heaviest weight at 30%, followed by output with 25%, employment with 20%, suppliers’ delivery times with 15% and stocks of purchases with 10%.

Among the seven tracked members of the 10-country Association of Southeast Asian Nations, Philippine manufacturers saw the third-fastest pace of expansion, down from the second spot in February as Vietnam outpaced with a 51.9 reading. Myanmar led the list with 52.4. The Philippines topped the region in January.

Still, the country’s PMI score is above the regional average of 50.3, which also improved from February’s 49.6.

FACTORS
Factories covered by the March survey reported that they enjoyed strong customer demand, particularly from the construction sector at a time of a state-led push for infrastructure projects.

“While many businesses saw volumes of work increase from February, others reported decreased production due to falling sales and reduced supply of raw materials,” Nikkei said in a press statement, describing the increase in new orders as below average.

Firms also reported longer delivery times due to congestion woes at the Port of Manila.

“Slowing output growth and a comparably modest rise in new business hampered manufacturers in March, with the PMI sliding for the fourth month running,” the statement quoted IHS Markit Economist David Owen as saying.

“Port congestion at Manila continues to increase lead times and reduce raw material supply, and will likely harm exports if the problem is not contained,” he added.

“However, managers will be pleased with reports of even softer price pressures, which should boost profit margins.”

There was also “a marginal fall in work fore numbers in March,” the statement added.

In February, the Alliance of Philippine Customs Brokers and Trucking Associations flagged a brewing port congestion as truckers noted that they could not find space to drop their empty containers at the Port of Manila.

The Bureau of Customs said it was looking to tighten enforcement of a 90-day limit for empty containers, and was looking to require international shipping lines to set up warehouses outside the capital.

Still, Mr. Owen said the recent PMI trends show weaker growth in production during the first quarter.

Factories also pointed to weaker overseas demand and “administration issues” which affected last month’s sales.

Still, manufacturers bought more input stocks in anticipation of new orders, although such growth is still softer than previous increases.

What’s more, business sentiment about future prospects also dropped to an all-time low by the end of the quarter, amid doubts about output growth for the rest of 2019. — Melissa Luz T. Lopez